Indicators point to further retail recovery in 2015
Retail Ireland, the Ibec group that represents the retail sector, today published its Q1 Retail Monitor (see attached pdf), with key indicators pointing to further improvements in the sector’s performance this year.
This follows positive trends during 2014 and a Christmas trading period up on 2013. Strong January VAT returns, which were €225 million or 12.9% ahead of last year, suggest the recovery is starting to gain traction.
The group however warned that the retail recovery is still in its infancy and many pressures remain. The sector is still operating at levels far below that reached during the boom years. Turnover is down nearly 20%; employment in the sector has fallen by 44,000; and 3,500 retail units closed during the recession. Many businesses are still constrained by boom time costs and charges. Progress could easily be undone if costs, including wages, increase beyond what is affordable.
Retail Ireland Director Tom Burke said: “Talk from certain unions of large, wide-spread pay awards is utterly unrealistic and at odds with the reality facing retailers around the country. Creating unrealistic expectations will only result in harmful discord in workplaces and could force companies to rethink recruitment plans. Retail was one of the last sectors to feel the recovery and we still have a very long way to go.”
The Retail Monitor tracks key issues across the economy and the sector, to give an insight into future performance and current challenges. The group estimates consumer spending will rise by 2.7% in 2015, following growth of 1.3% last year. Key factors supporting further recovery over the coming months include an expected rise of 55,000 in the numbers at work, and a rise of 3.5% – 4% in disposable income. The dramatic fall in oil prices will also boost consumer spending power. Every $10 fall in the price of a barrel of oil translates into an additional €100 million spending power for Irish consumers.
Consumers look set to benefit from yet another year of low inflation, with intense competition keeping prices down. The group estimates overall inflation in the economy to be 0.4% this year. At present, goods inflation is at minus 2% annually as shops battle for footfall.
Other key retail trends set out in the Retail Monitor include:
- Supermarkets and convenience stores: The greater Dublin area continues to record the strongest recovery, with regional locations lagging behind.
- Service stations: Sales of unleaded petrol have been declining for some time as consumers switch to more fuel efficient vehicles, which, coupled with increased economic activity, continues to drive significant growth in diesel sales.
- Pharmacies: Sales of healthcare products are up as more people getting coughs and colds compared to last year.
- Furniture: The recovery in the property market means that furniture sales look set to lead the retail recovery. Electronic sales also benefitting.
- Books, newspapers: Sales continue to struggle because of the migration to digital formats.
Mr Burke continued: “The sector has had some very tough years, but indicators would suggest that fortunes are starting to look up. Key indicators are pointing in the right direction. More people are at work, disposable income is rising and falling oil prices will increase consumer spending power. This is good news for the wider economy. It means more jobs and more tax revenue.”